Less Pressure On Stocks

Sugar stocks in the EU (including the UK) now look less tight towards the end of the 19/20 season.
Stocks at the low point of the cycle (October 2020) will be above what we consider a ‘comfortable’ level (15% stocks-to-use).

This is because we have reduced our EU consumption estimate by 700k tonnes (4%) for the rest of the 19/20 season due to the coronavirus outbreak.
This reduces the production deficit within the EU to 400k tonnes.

Lockdown restrictions across much of Europe mean out-of-home sugar consumption will decrease.
Food and drink in bars, restaurants and at events tends to be high in sugar.
Coca-Cola has already reported a decline in sales due to the closure of restaurants, postponement of sports and large entertainment events and a slump in global travel.

EU Premium To Weaken

With less pressure on stocks, we expect the EU premium to the world market to gradually reduce.
EU prices have been trading at a large premium to the world market for most of the season.
This has meant comparative returns for world market exports have been poor.
The pace of exports has slowed considerably to below 25k tonnes per month as a result.

If the EU premium narrows, exports are likely to become more attractive in the 20/21 season.
We currently forecast 1.2m tonnes of exports next season, 400k tonnes more than this season.

Unless there is a large decrease in the EU premium, sugar imports into the EU will not reduce.
We expect imports of just under 2m tonnes in 20/21 season, the same as in 19/20.

This is because of duty-free sugar imports, which allow the exporting country to take advantage of any EU premium to the world market.
African, Caribbean, Pacific/Less Developed (ACP/LDC) countries have duty-free imports up to 1.25m tonnes.
There is also a Free Trade Agreement (FTA) with several other countries such as South Africa and Central America of up to 700k tonnes.

20/21 Production Update: Sowing Into Wet Fields

Farmers across the EU are now starting to plant their sugar beet.
A wet winter across North-West Europe left some fields submerged in water.
We think planting may be delayed in some regions, but this should have a minimal impact on sugar output.
We forecast 17.8m tonnes of sugar to be produced in 20/21.

We expect yields in most countries to increase in 20/21 as they have been below average for the past two seasons.

Planted area will remain almost unchanged, with small increases in area in Poland and Germany being offset by reduced acreage in the Netherlands and France.

Ben Seed

Ben joined CZ’s analysis team in 2016 on a year long internship before returning to the University of Bath to complete an Economics Degree. Since re-joining in August 2018, Ben has led the data insights team in expanding the range and quality of data available internally and to clients through CZ App. Ben spent 3 months in CZ’s Singapore and Bangkok offices to expand his knowledge of the region and help roll out the latest data processes. He is now also responsible for the Sugar Market View published each week on CZ App.